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Topic: 2013 Emerging Trends in Real Estate (Read 1214 times)

Emerging Trends in Real Estate, a trends and forcast publication now in its 34th edition, is one of the most highly regarded and widely read forecast reports in the real estate industry. Here is a brief list of emerging plays or "best bets" for 2013. Is Jacksonville ready to cash in?

Going by this list, Jax is on the very cutting edge of mid-20th century real estate trends...

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"Let us not be blind to our differences, but let us also direct attention to our common interests and the means by which those differences can be resolved. And if we cannot end now our differences, at least we can help make the world safe for diversity."--John F. Kennedy, 6/10/1963

It makes you wonder when we have those who still think that the market is going to go back to the good old days. the 21st century economy will be different than what we've grown used to since WWII. We really need to be putting policy in place that allows us to take advantage of the changing trends. It also wouldn't hurt to take some time to figure out what jobs aren't coming back, what industries will increase in employment, and what we need to do to place ourselves in position to cater to growing trades and professions.

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"A man who views the world the same at 50 as he did at 20 has wasted 30 years of his life.” - Muhammad Ali

And this is what bugs me when people always talk about evil "developers" on these forums. In Jacksonville they just happen to be a little unsophisticated, a little GOB mentality, a little clingy to what's easiest and back room deals. They aren't evil everywhere.

Jacksonville demographics and land use policies and general policy are a little behind the times and a little mixed up. That's all developers respond to, besides market fundamentals and job growth.

In the most progressive of cities, development is literally controlled 50-50 between private and public. In SF, for instance, nothing is getting built without a years long Planning Commission entitlement process and then a landowner going to market with an entitled property and selling to a sophisticated core investment group that has the wherewithal to build something quality when the market allows them to do so (i.e. no crazy spec).

In Atlanta, it's a lot more lax with office, but still the various city agencies have their toes in every process to ensure that development quality slowly but surely goes up and the city gets built properly. The thing they don't have under control there are restrictions on how much can be built (leading to the whole entitlement process that defines SF and NYC). For instance, in SF Proposition M ensures that only 875,000 SF of office space can be built each year. This prevents extreme cycles of delivery facing lax job growth and therefore a glut, lowered rents, and mini-localized recession (Atlanta and Chicago are notorious for overbuilding, even when facing minimal job growth).

To make an interesting comparison to Jacksonville:

In the Bay Area, there are about 7.6 million people. That number is projected to climb to 7.9 million people in 2017, about 8% decadal growth, high for the area. Yet only 3,000-4,000 new construction residential permits are offered in the ENTIRE BAY each year (about 60-70% to multifamily). The average HH size in the area is about 2.8, so that's enough new housing for 84,000-112,000 a decade, yet anywhere from 400,0000-500,000 move to the area each year.

What gives? Renovations and re-use. 60% of the city and still a good chunk of the metro rent...so developers are forced to be creative with offering housing to the growing population. Contrast that with Jacksonville, adding less people than SF each decade (though much higher growth rate) and still a good 5-10,000 new construction residential permits each year on average, mostly single family housing (I realize it's down to about 4,000 in 2012 and 50-50ish). So the city provides no reason to force developers to even look at re-using older buildings...local fee-based guys can just build, build build new crap homes whenever and wherever, contributing to the boom and bust aspect of local housing (and so we hate "developers", many of whom in Jacksonville were simply your local dentist looking to cash in as either a banker or a developer).

Local retail in SF is the same way...average new deliveries in the past 10 years are 370,000 SF in the city, but absorption has outpaced supply for all but one of those years (2009). As a result, the vacancy is 3.6%.

Jacksonville just hasn't evolved at the governmental/regulatory level yet. When this happens and when by an act of God the market fundamentals (i.e. job growth, income growth, education, transportation, etc) improve dramatically, the developers will respond. First there will be outside developers who don't just treat the city as a place to park lower tranche risk-money and hope it pans out. Then maybe there will be 1 or 2 local guys who are comparable to the local developers who are doing great things in and with the Cities of Nashville, Charlotte, Austin, Orlando, etc. Right now the city just doesn't have a developer to give developers a decent report card/name, and that's moreso the city's fault and the fault of fundamentals in the market (which can also be traced back to the City, and the State).

And might I add for the umpteenth time that in the irony of all ironies Peter Rummell was chairman of the entire ULI Foundation and the local chapter for so long. Still, I have never seen Jacksonville come up in Urban Land or with any examples of successes or thinking outside the box. It would be interesting to hear him weigh in on the topic of why none of the emerging trends ever show up in Jax.

"For instance, in SF Proposition M ensures that only 875,000 SF of office space can be built each year. This prevents extreme cycles of delivery facing lax job growth and therefore a glut, lowered rents, and mini-localized recession (Atlanta and Chicago are notorious for overbuilding, even when facing minimal job growth)."